$1bn Gulf project bond within six months: HSBC

DUBAI: A $1 billion project bond from a Gulf borrower is likely to be issued in the next six months, an HSBC executive said on Sunday, adding Qatar's Barzan gas project was a "likely candidate" for the sale.

Jonathan Robinson, HSBC's regional head of project finance, said the project bond would be in the hydrocarbons or power and utilities sector.

However, he declined to say whether banks had been mandated for the deal, which would support the $10 billion joint venture between Qatar Petroleum and ExxonMobil.

"It is likely to happen in the next six months but it would be premature to say that banks have been mandated. However, we are a very well known and large bank in the region so you would expect us to be in there," Robinson told reporters.

Banks are evaluating a $4.7 billion syndicated loan for the project launched to the market last month.

Raising such a large amount from banks in a difficult funding market would make Barzan a "bellwether" for future project financings in the region, Robinson said.

Bankers told Reuters last week the pressure on European banks' cost of funding had pushed up the pricing of the loan.

This comes at the same time as project bonds have garnered increased interest as a way of diversifying funding sources for MENA (Middle East and North Africa) infrastructure projects.

Abu Dhabi Water and Electricity Authority (ADWEA) has reportedly picked HSBC to advise on the $2.2 billion refinancing of its Shuweihat 2 loan and plans to issue a bond.

Robinson declined to comment on this.

The executive said the lender was hopeful it could continue with mandates it had secured before the unrest in Libya, worth around $3 billion, despite the country's immediate future remaining unclear. We are optimistic about it.

We had two mandates: one in hydrocarbons and one in power and utilities. These were disbanded but we are enthusiastic to pick them up again. We still believe very strongly in the fundamentals in Libya and it remains a focus area for the bank."

He added that in Dubai, the Hassyan independent water and power project, on which HSBC is advising Dubai Electricity and Water Authority (DEWA), has attracted strong interest during the bidding phase.

"We have seven strong contenders for consortia. There will be some consolidation which will bring this down to four or five. The bid deadline is October 18 but is likely to be extended."

The Hassyan scheme is the first time the Dubai government has used the public-private partnership (PPP) model to fund the construction of a project.

Copyright Reuters, 2011